However, Pacific Edge’s current $1million-a-month cash burn has led to stockbrokers raising the prospect of it having to again go back to shareholders for a capital top-up, until US sales gain more traction.
For its half-year interim report to September, Pacific Edge’s $11.3million loss included a one-off $2.9million expense to wind up its employee incentive scheme, while a "primary driver" behind increased cash expenses of $12.1million was the boosting of the US sales team from 12 to 18. Pacific Edge’s full-year revenue to March rose 91% to $6.37million, while
revenue in the latest first half increased 42% on a year ago, rising to $3.8million.
Pacific Edge chief executive David Darling said while total revenue was $3.8million, it was negatively affected by the strength of the New Zealand dollar against its US counterpart and reduced income from grants, the result of changes in Callaghan Innovation’s growth grant scheme.
"Revenue is being driven by increasing commercial sales of Pacific Edge’s Cxbladder tests, from both existing and new customers, predominantly in the USA," Mr Darling said.
Pacific Edge has $14.6million cash in hand. Last year’s full-year loss of $15.4million saw total consecutive losses since listing rise beyond $73million.
Craigs Investment Partners broker Peter McIntyre said the revenue gains were not yet significant enough to offset the increasing cash burn, raising the question of a future capital raising.
"There’s a likelihood they’ll have to go back to shareholders for more capital, unless something miraculous happens.
"They have had rapid and aggressive expansion into the US," Mr McIntyre said.
Having raised about $20million in 2013-14, Pacific Edge raised a further $35million in 2015.
During the past year, analysts have estimated Pacific Edge’s monthly cash burn to be about $1million to $1.3million.
Forsyth Barr broker Lyn Howe said Pacific Edge’s $3million products sales was materially ahead of a year ago, but below her expectations of $4.1million.
"At this stage in its life cycle we are less focused on numbers and more on the outlook commentary and cash burn," Mrs Howe said.
With $14.6million cash in hand, Pacific Edge’s cash burn was "modestly ahead of our expectations", but Pacific Edge was well positioned to capitalise on its diagnostic technology.
"However, cash levels will be a key metric to watch, with Pacific Edge holding about 12 months of cash on hand, at current burn rates.
"This looks fairly tight and there is risk the business may need additional cash."
She noted there was no mention in the report of the longstanding $100million revenue target, no insights into cash burn nor any cost expectations for the remainder of the year.
While Pacific Edge had provided lab throughput numbers for the first time, with test numbers up 72% on a year ago at 5622 tests, no detail was provided on the breakdown between commercial tests and user-programme tests, Mrs Howe said.
"Investors continue to require patience with Pacific Edge, with the large US market complex and challenging to secure reimbursement," she said.
During the past year Pacific Edge had clinched several crucial contracts, including acceptances from the US government’s Veterans Administration (VA) and TRICARE, and had completed a Kaiser Permanente user programme, which is considered one of the world’s foremost medical validatory organisations.
Between them, the organisations represent tens of millions of potential customers.
Pacific Edge chairman Chris Gallaher said the US health-care market was "complex and challenging", but Pacific Edge was making "very good progress" and the US remained its most significant opportunity.
"Achievement of our financial goals is dependent on acceptance and uptake by the large USA health-care organisations we have identified as transformational customers," Mr Gallaher said in a statement.
While Pacific Edge had signed the Federal Supply Schedule, had contracts with the VA and TRICARE and had successfully completed the Kaiser Permanente user programme, this had taken longer than anticipated.
"Each one of these could result in a quantum leap in sales revenue as we bring them on board as commercial customers."
